Back door Roths and existing SEP and Simple IRA accounts
If taxpayer has an existing SEP IRA or Simple IRA account, and wishes to make a non-deductible traditional IRA contribution to subsequently convert to a Roth IRA, will the SEP and Simple accounts need to be taken into account when determining the taxable portion of the traditional IRA conversion to the Roth? There is no doubt that other traditional IRA accounts would have to be considered, but is there an out for SEPs and Simples?
Permalink Submitted by David Mertz on Tue, 2018-12-18 20:45
Yes, the year-end values of the SEP and SIMPLE IRAs must be included on line 6 of Form 8606. They cannot be excluded.
Permalink Submitted by Alan - IRA critic on Tue, 2018-12-18 20:46
Yes. For purposes of the conversion, taxpayer must include the year end balances of SEP and SIMPLE IRAs along with TIRA accounts. This is stated on line 6 of Form 8606. Probably too late for 2018, but taxpayer might be able to roll the pre tax SEP and SIMPLE balances plus TIRA gains over to an accepting employer plan late next year, and that would result in a tax free conversion.